Ten Tips to Survive Minimum Wage Increases

Increased minimum wages are a growing concern and unavoidable reality for many operators. Learn what you can do about them in this article from QSRMagazine.com by Juan Martinez.

Don’t you get tired of hearing about the impending minimum wage increase? It is no longer if it is going to happen, but rather when is it going to happen and what will the magnitude be? The reality is that nobody really knows, but if you look around, isn’t it already beginning to happen?

In some states there has already been action with hourly managers, minimum wage servers, and the hourly minimum being higher than federal minimum wage. In other states, there is quite a bit of legislation of one sort or the other pending.

So what can you do to survive and perhaps thrive through it?

Consider these top 10 ways to mitigate the impact of whatever minimum wage increase your business faces in the coming years.

1) Streamline the service process Look at how you serve your guests today and define ways to reduce the amount of guest service time it takes by applying a process reengineering methodology and lean principles. The trick is how you can do this without negatively impacting the guest experience. There are many examples of applications in this area—using kiosks, tablets, and even order and pay ahead and pick up in a designated area—that have basically transferred some of the work from the employees to the guests and not detract from the service experience.

2) Be ready for your rush Typically, you need a lot more labor during peak hours than non-peak, so try to minimize the peak labor requirements. Since you have to provide a minimum shift of hours to these employees, the labor impact is more than just the time at peak. So, strive to minimize the peak labor requirements. Even one person less could make a huge difference in the bottom line. Typical moves that can save time during rush are pre-portioning, pre-packing, and using the right tools.

3) Simplify food prep Analyze what is going on in the back by undertaking a back-of-house prep process re-engineering effort and determine options that can result in less labor needed to get this done. Develop a system that minimizes the need for prep during peaks and staff all-hands-on-deck, to do guest service. This would also minimize the peak labor requirements.

4) Consider value-added products Leverage your suppliers and ask them to suggest to you product components that could help reduce the prep or guest service labor that is required to get the products to your guests. It is likely that value-added products can increase the cost of food, but as long as the impact of the labor reduction is greater, then you should be better off.

“Labor schedules are all about having the right labor in the right place at the right time to drive the best guest and employee experience.”

You may ask, What about quality? After all, a fresher product is a higher quality product. While this is true, if you cannot deliver consistently at the unit level, then your quality is worse. Consider the consistency impact to your business.

For example, a restaurant may get chicken raw, marinate it overnight, bake, refrigerate, cut, and serve. Instead, you can have the supplier provide pre-marinated and pre-cooked chicken. Quality is about consistency as well and value-added product are typically more consistent than products that are processed in the store, since they were done by a machine under highly controlled environments.

5) Objectively define the labor requirements To know where labor should be spent and where the opportunities to reduce them are, it is important to understand how much labor it takes to do any activity. Once you have this information you can then provide the stores with the right amount of labor to get this work done. Although restaurants are in existence to provide shareholder value and make money, scheduling labor based on a financial metric alone is dangerous. If it takes a certain amount of time to deliver a product to the guests, then the schedule should reflect this time, regardless of how much you sell it for. If this amount is too high and in aggregate not affordable from a financial perspective, then refer to some of the prior suggestions and re-engineer the processes to reduce the labor needed. Not giving the stores the right amount of labor may provide the right level of profit, but it is likely not providing the right level of hospitality.

6) Schedule systematically You have to have a system to manage labor in a systematic way; otherwise the use of this very expensive resource can be compromised. The best labor management systems are those that are based on work content, activity, and product mix.

After you know the right amount of labor time to do each task, using the information provided by the labor management system to develop a schedule that maximizes the available labor. During peak times, all the labor should be geared to serve guests and prep should be done before and after the peaks, to use the available labor and minimum shifts better.

Labor schedules are all about having the right labor in the right place at the right time to drive the best guest and employee experience. It is important to spend time analyzing the projections and schedule to ensure a good schedule efficiency rating.

7) Increase throughput for different hourly volumes Labor costs would immediately go down, if the hourly throughput were increased. So figure out where your throughput bottlenecks are at and resolve them. For example, reducing window time by 10 seconds in the drive thru will not only result in a total customer time reduction of a minute or more, with a car stack of six, but will also increase the sales in that period by nearly 18 percent, resulting in a similar labor efficiency improvement.

8 ) Leverage equipment and technology Similar to leveraging the product suppliers, equipment suppliers can offer tremendous insight to drive labor cost reductions. For example, tending to a product on a grill, takes more labor than placing it in a conveyor oven that when the product comes out of the other side, it is done.

Information management can also simplify the employees’ work, resulting in less time to get things done, which in turn can drive labor reductions. As an employee is going about doing their duties, look at the amount of information they have to deal with and watch their eyes roll around the screen, looking for what pieces of information to execute on first, when it is too much. If the screen gets full, matters get worse, since they just won’t see what they need to act on until sometime later on, impacting the throughput capacity, and by de-facto, increasing labor cost for that period, since they can end up selling less.

9) Eliminate complex menu items If you can’t re-formulate some menu items to require less labor by re-engineering the processes, and or leveraging value added components or equipment, then consider eliminating them. Examine your menu from 10 years ago and compare it to now—you might realize that complexity has just gotten out of hand.

10) The last resort should be increase prices This option has a risk of impacting traffic, resulting in lower sales, and then subsequently lower profits. It should be done as a last resort and done very carefully. Think about what you can offer the customers, as the prices are going up. Maybe you can tie it with some other initiative that adds value to their visit, like a full menu and menuboard revamp.

Although the prior suggestions have been focused on hourly labor, let’s not forget to keep our eyes on simplifying the manager’s job as a means to minimize the impact of the hourly wage increase. Not only will this enable the manager to run a more efficient restaurant, but, as appropriate, this can also make time available for the manager to perform some hourly duties, resulting in a flattening of the required staffing during peak hours. There is always a position in the restaurant that provides the managers a vantage point to run the show, while doing some hourly labor duties.

So how should you start dealing with this issue?

First things first, you need to truly understand how your labor is being utilized and be more analytical on the way you manage the labor resource. One recommendation is applying the principles of industrial engineering, such as time and motion and activity analysis, including an overall operations and investment study that will provide you the objective information that will drive the initiatives that make sense for the business. Once you are armed with this type of objective information, you can start doing battle to the issue of minimizing the impact of the hourly wage increase. So don’t be afraid, but also don’t sit idly waiting to happen, since by then, it may be too late.